Market Analysis

Beyond the Numbers

Markets May Relish Strong Retail Sales Growth
3/13/2012 9:39 AM

The major U.S. index futures are pointing to a higher opening on Tuesday, with sentiment likely to get a lift from a report showing healthy consumer spending growth- the key to a sustainable economic recovery. With Greece now being relegated to the backburner, the focus is likely to be on macroeconomic fundamentals. Traders may also keep a close eye on the FOMC policy statement due in the afternoon, as they strive to read between the lines to see whether any stimulus may be forthcoming.

U.S. stocks moved about in a lackluster fashion on Monday amid global growth worries and the ongoing concerns surrounding Greece and some of the other peripheral eurozone nations.

The Dow Industrials remained mostly above the unchanged line throughout the session before closing up 37.69 points or 12,960. After languishing in the red in the morning, the S&P 500 Index moved back and forth across the unchanged line in a narrow range and ended up 0.22 points or 0.02 percent at 1,371. Meanwhile, the Nasdaq Composite closed 4.68 points or 0.16 percent lower at 2,984.

Twenty-one of the thirty Dow components closed higher, with Exxon Mobil (XOM), Wal-Mart (WMT), Home Depot (HD), Procter & Gamble (PG) and Merck & Co. (MRK) leading the gains. On the other hand, J.P. Morgan Chase (JPM) and Caterpillar (CAT) slid over 1 percent each and Bank of America (BAC) and American Express (AXP) fell about 0.80 percent.

Utility stocks advanced, while, airline, oil service, gold, semiconductor and basic material stocks came under selling pressure.

Commodity, Currency Focus

Crude oil futures are receding $0.35 to $105.99 a barrel after declining $1.06 to $106.34 a barrel on Tuesday. Gold futures are currently receding $12.60 to $1,687.20 an ounce. In the previous session, the precious metal fell $11.70 to $1,699.80 an ounce.

On the currency front, the U.S. dollar is trading at 82.7323 yen compared to the 82.23 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.3062 compared to yesterday’s $1.3154.


Most Asian markets advanced after the Eurogroup ministers gave their final approval for the second bailout package for Greece.

Japan’s Nikkei 225 average opened slightly higher and advanced sharply in early trading. After moving sideways until late trading, the Nikkei shed most of its gains but still closed up 9.22 points or 0.09 percent at 9,899. The late-session weakness reflected the disappointment of traders over the central bank’s decision to maintain a status quo position.

The Monetary Policy Board of the Bank of Japan decided to keep the uncollateralized overnight call rate unchanged at 0-0.1 percent and also kept its asset purchase program at its current level. At the same, the central bank announced an augmentation of its Growth-Supporting Funding Facility by 2 trillion yen to 5.5 trillion yen.

Financial, real estate, retail, pharma and telecom stocks gained ground, while export stocks saw a setback after the Bank of Japan decision lent support to the yen.

Australia’s All Ordinaries closed at 4,337, up 48.30 points or 1.13 percent, with healthcare, material and energy stocks leading the gains, and Hong Kong’s Hang Seng Index added 205.52 points or 0.97 percent before closing at 21,340.


The major European markets are moving to the upside, adding to yesterday’s gains. The French CAC 40 Index is adding 1.10 percent and the German DAX Index is gaining 0.86 percent, while the U.K.’s FTSE 100 Index is moving up 0.66 percent.

In corporate news, copper miner Antofagasta reported adjusted earnings of $1.397 per share for 2011, higher than $1.006 per share last year, as revenues rose 32.7 percent to $6.08 billion.

Meanwhile, security firm G4S reported a 6 percent increase in its 2011 adjusted earnings per share to 22.8 pence and sales were up about 5 percent at 7.52 billion pounds.

U.K. insurer Prudential reported a 7 percent increase in its 2011 operating profit to 2.07 billion pounds.

BMW reported higher earnings and profits for 2011 and increased its dividend to 2.30 euros per share. The company also said it expects new highs for sales volume and earnings for 2012.

A report released by French statistical agency INSEE showed that French consumer prices rose 0.4 percent month-over-month and were 2.3 percent higher year-over-year in February.

U.S. Economic Reports

A strong performance in the automotive sector fueled a surge in U.S. retail sales in February, according to figures released by the Commerce Department. Commerce Department figures put retail sales levels for February at a seasonally adjusted level of $407.8 billion, a 1.1 percent increase over January levels.

Sales rose at their fastest pace since September, with the sale growth coming in roughly in line with economist estimates.

The increase comes atop revised figures showing a 0.6 percent increase in January retail sales compared to the 0.4 percent increase initially reported. Compared to February of 2011, retail sales are up 6.5 percent.

The Commerce Department is scheduled to release its business inventories report for January at 10 am ET. The report summarizes the results from the monthly retail trade, wholesale trade and factory goods orders surveys. The report is expected to show a 0.5 percent increase in business inventories for the month.

Business inventories rose 0.4 percent month-over-month in December, while economists had expected a 0.5 percent increase for the month. Meanwhile, business sales rose 0.7 percent, resulting in an inventories-to-sales ratio of 1.26 in December compared to 1.28 in the year-ago period.

The Federal Open Market Committee is scheduled to begin a 1-day meeting to discuss the near term direction of monetary policy. The monetary policy-setting arm of the Federal Reserve is set to release a post-meeting policy statement at 2:15 pm ET.

Following the conclusion of the 2-day monetary policy meeting in January, the Federal Reserve said it expects economic conditions over the medium term to warrant exceptionally low levels for the federal funds rate at least through late 2014 compared to its earlier view of keeping interest rates unchanged till the middle of 2013.

Much of the remainder of the statement was maintained unchanged, with the central bank reiterating its commitment towards implementing its already announced bond buying program.

Updating its economic forecast, the Fed lowered the central tendency of its 2012 GDP forecast to 2.2-2.7 percent from 2.5-2.9 percent. The 2013 forecast was also lowered to 2.8-3.2 percent, but the 2014 forecast was upwardly revised to 3.3-4 percent from 3-3.9 percent.

Stocks in Focus

Copart (CPRT) announced that its board has approved a 2-for-1 split of its common stock, with the additional shares resulting from the stock split to be distributed after the close of trading on March 28th, 2012 to stockholders of record on March 23rd, 2012.

Ahead of an investor conference, Anadarko Petroleum (APC) said it estimates its capital expenditures for 2012 to total $6.6 billion to $6.9 billion. The company also said it expects total sales of 61-63 million barrels of oil equivalents for the first quarter and 256-260 million barrels of oil equivalents for 2012.

Esterline (ESL) announced its CEO Bradley Lawrence has been selected to serve as Chairman of its board, effective March 7th, 2012.

CME Group (CME) announced that its long-time CEO Craig Donohue has informed the company of his decision to step down when his employment contract expires in December 2012. The company also said its executive Chairman Terrence Dufffy has been appointed to the expanded role of executive Chairman and President and current President Phupinder Gill has been appointed as CEO.

Nautilus (NLS) reported fourth quarter income from continuing operations of 11 cents per share compared to 6 cents per share last year, as net sales climbed 11.7 percent to $60 million.

Inter Parfums (IPAR) reported that its fourth quarter earnings slid to 13 cents per share from 20 cents per share even as sales climbed 68 percent to $189.1 million. The earnings trailed estimates, while revenues were above consensus expectations. For 2012, the company expects earnings of $1.16 per share on revenues of $625 million. The guidance trailed estimates.

Majesco (COOL) reported first quarter non-GAAP earnings of 18 cents per share compared to 20 cents per share last year, while analysts estimated earnings of 20 cents per share. The company’s net revenues of $66.18 million rose 37 percent year-over-year and were also above the consensus estimate of $54.91 million. The company expects 2012 earnings that could meet or miss expectations, while its revenue guidance surrounded the consensus estimate.

Urban Outfitters (URBN) reported fourth quarter earnings that declined to 27 cents per share from 45 cents per share last year. Net sales were up 9 percent at $730.65 million. The results were below expectations.
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